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EASILY EXPLAINED: Shares outstanding, float and market cap

by , 14 July 2022
EASILY EXPLAINED: Shares outstanding, float and market cap
Q. “I've been looking at stock trading lately. I see each share is calculated according to market capitalization. I'm trying to wrap my head around this. Could you explain the difference between market capitalization, shares outstanding and shares floating?”


A. With stock, you are 100% correct in saying it is calculated by market cap.
Each listed (public) company has two types of share.

Shares outstanding and shares floating.

Before we calculate the market cap, we first need to identify the difference between the types of share.

Shares outstanding in a nutshell

Shares outstanding consists of ALL the shares of a company.

These are shares that are authorized, issued and purchased by investors and are held by them.

Shares outstanding also include shares that are not available to trade including:

1.    Restricted shares
2.    Treasury shares
3.    Closely held shares

Float shares explained

Float shares are the total number of shares that are available to the public to trade.

When it comes to market capitalization, we’ll need to take into account ALL the shares available in total.

So, here’s an easy calculation you can use:

Market Capitalization = (Market share price X Outstanding shares).

To calculate the market-cap, let’s use a made-up company called FSP Ltd.

FSP has three companies:
Company F, Company S and Company P.

Here’s the table to work out the market capitalization of the company

 
 

So, you can see Company FSP’s market cap would be worth R5.2 billion. This will also give you an indication on whether the company you want to trade is small cap, mid cap or large cap.

"Thank you so much Timon for the trading recommendations and sharing your knowledge and experiences about trading.

You’ve made trading sound so easy and straight forward and I’ve so far closed three winning trades in the last month thanks to you!

Keep it up and looking forward to the next trade.
Click here if you want to profit and bank hat trick trades like Johan!

We’ve seen some BIG gains from our forex trades this last two weeks…
 
155% on the USD/ZAR; 245% on the EUR/USD

If you want to profit from the forex and offshore markets then why not
test Pickpocket Trader for 90 days risk-free here.

***
Q. “Since I joined Red Hot Storm Trader, my trading knowledge has definitely improved and has been focused on what I need to do to grow my account. However, there are two questions I have when I’m in a trade. Last week, I decided to fly to Australia to see my kids and I had two or three trades opened. However, I wanted to close my trades and feel relaxed knowing I don’t have anything to worry about in case the market takes another dive. Anyway, my questions are:

1. How do I cancel a trade that hasn’t been executed in the market?
2. How do I confirm that I have successfully exited a trade?

Once I have these questions answered, I’ll be way more relaxed as a trader.

Thank you Timon.”


A. I know exactly what you mean. With the markets being chaotic in the last few months with the crypto winter, the Russian war and economic recessions taking over – It can be quite nerve wracking leaving your trading to fate while you’re flying.

I’ll be quick and answer these questions in order:

1. How do I cancel a trade that hasn’t been executed in the market?
The only way you can cancel a trade from being taken, is if the trade order is still pending (still in the market).

This is where the price hasn’t reached your entry level and where your order hasn’t been filled.

There are two ways to cancel a trade from being executed.

First you can go onto your trading platform and cancel the pending trading order.  

Note: Call your broker so they can show you how to cancel a pending order.  
And second, you can call your broker and ask them to cancel the trade that is currently pending.  

How do I confirm that I have exited a trade?
After you’ve placed your entry, stop loss and take profit price levels, you’ll then let the market take over.

Once the market price trades at the take profit or the stop loss level, you’ll see that your trade should be closed out completely. However, if you want to close your trade, you’ll need to go to your trading platform right click on the trade you wish to close and find the option to close it.

With Velocity Trader you’ll simply follow these steps:

1.    Go to the Positions Table (where all your opened orders are)
2.    Right click on the trade you wish to close
3.    Click Close Position

 
 

4.    Choose the number of CFDs you wish to close and click enter
5.    Done!
 
If you still feel anxious, you can call your broker and confirm you have closed your trades successfully.

Happy and stress-free flying for the next time you travel.

PS.  In the last 32 days, we've closed three nice little trades on Sasol, Anglos and BHP.  That's a cumulative profit of 72.33% from these three wins in a row.  My fourth trade is lining up so
if you want in on these kinds of profits, you can join my group of Red Hot Storm Traders here.




EASILY EXPLAINED: Shares outstanding, float and market cap
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